Home-Based Business Fact Sheet Taxes and Permits

#3014

Zoning regulations

Many cities and towns have zoning ordinances Among the “facts of life” in the business world that restrict certain commercial activities to are government regulations and taxes. Federal, certain areas. There may also be local guidelines state and local governments regulate and tax regulating business activities, such as the use of businesses for several reasons, such as raising advertising signs, lighting and parking. Be sure revenues, protecting the public from dangerous you know about your local ordinances before substances and fraud, and protecting businesses you make any major investment in your from unfair or illegal competition. business. If you are thinking of starting a business, you’ll find it’s worth your Business permits while to know in advance what Some cities and towns require busilicenses, permits and tax stamps Taking care nesses to obtain a general business you’ll need. Few things can be more permit before they will allow them to of all your frustrating than finding out by begin operation. Local governments license and accident—while you’re trying to also may require special permits for purchase supplies, perhaps, or operators of amusements like video permit needs applying for a loan, or filling out games or billiard tables, personal before you your tax returns—that you need services like massage parlors or some business permit or license. actually start barber and beauty shops, and other Taking care of all your license and doing business businesses. permit needs before you actually will save you Building permits start doing business will save you If you’ll be erecting a new building or time and trouble later on. time and remodeling an existing one, you’ll Meeting your business’ tax, permit trouble need a building permit. The city or and licensing needs should not be later on. town building inspector will need to extremely difficult. This publication make sure your building meets local outlines the more common tax, code requirements before you open. license and permit needs of someone starting a small business in Maine. Addresses of various state and federal agencies that can provide more detailed information on taxes, licenses and permits are listed.

Local requirements The first place to go before you start operating a business is your city clerk’s office or your town office. Here you’ll be able to find information to help you meet local permit and licensing requirements. Local regulations vary from place to place, but there are some common requirements.

Beer and liquor licenses Even though they’re issued by the state, licenses to sell beer or liquor must be approved by the city or town. Your clerk or auditor can provide information on applying for a license and can also explain any special local requirements or permit required.

Tobacco sales permits If your business will include retail sales of cigarettes or other tobacco products, you’ll need to obtain a state license. If you will be distributing or selling such products at wholesale, you’ll also need an appropriate license from Maine Revenue Services.

You must decide what form of organization—sole proprietorship, partnership, corporation or limited liability company— your business will have. Business registration Before you start in business, you must decide what form of organization—sole proprietorship, partnership, corporation or limited liability company—your business will have. (For information on organizing your business, see How to Organize Your Business in this series.) The form of organization you choose will have a bearing on whether and how you’ll register your business with state and local governments. If you choose to start a sole proprietorship, you may not need to register your business at all. (If you give your business a name different from your own, however, you may need to file a d/b/a (“Doing Business As”) certificate at the municipal clerk’s office in the city or town where your business is located.) If your business will be a partnership, you should file a partnership certificate with the Secretary of State. Both these certificates require a small recording fee. If you plan to incorporate a new or existing business, you must file articles of incorporation with the Secretary of State. These are legal documents describing the planned structure and

operations of your business and, in most cases, are best prepared with the aid of an attorney. There is an initial fee to file articles of incorporation. Contact the Secretary of State if you plan to organize your business as a limited liability company.

Sales and use tax permits If you’ll be selling retail goods or services subject to Maine sales tax, you’ll need a sales permit. Along with this permit you’ll receive information about how to file your sales tax returns. You may want to inquire about a temporary permit if you’ll be making sales only one or two days each year. To apply for a sales permit, contact Maine Revenue Services Sales Tax Division P.O. Box 1065 Augusta, ME 04332-1065 (207) 624-9693

Payroll taxes All corporations and other employers in Maine are required to withhold estimated income tax payments and other payroll taxes from employees’ wages. Before you hire employees, you’ll need to register with state and federal taxcollecting agencies and receive information about withholding procedures.

Employer Identification Number (EIN) An Employer Identification Number (EIN) is issued to businesses by the Internal Revenue Service for federal tax purposes. All partnerships, corporations and limited liability companies are required to have an EIN. Sole proprietorships are also required to have an EIN if they do either of the following: • Pay wages to one or more employees • File any type of federal pension or excise tax return Sole proprietorships not required to have an EIN can use their social security numbers on all tax returns. You can get an application (Form SS-4) to receive an EIN from the IRS. Along with your identification number, the IRS will also send you information about federal income tax and

social security withholding and any federal taxes for which your business may be liable. To apply for an Employer Identification Number, contact Internal Revenue Service 68 Sewall St. Augusta, ME 04333 1-800-829-4933 There are several IRS offices conveniently located around the state. Call the toll-free number for additional information.

State income tax withholding If your business is a corporation, or if you will have one or more employees, you must withhold estimated state income tax payments from your employees’ wages. To comply with this require-

If you’re starting a business that will employ one or more people, you’ll benefit by finding out in advance about your responsibilities for unemployment insurance, workers’ compensation, and health and safety standards.

Unemployment insurance All employers in Maine must contribute to the state’s unemployment insurance fund. Job Service of Maine, which administers the fund, has an Employer’s Guide to Maine Employment Security Law, explaining the state’s unemployment insurance requirements. To receive a copy, contact your local Job Service office or Maine Department of Labor Bureau of Unemployment Compensation ATTN: Central Registration Unit P.O. Box 259 Augusta, ME 04332-0259 (207) 621-5103

Workers’ compensation

ment, you’ll need to register with Maine Revenue Services. When you register, you’ll need to provide your federal Employer Identification Number, which you’ll use on most of your state as well as federal tax documents. Maine Revenue Services will then send you information about state income tax withholding requirements. To register with Maine Revenue Services, contact Maine Revenue Services Income Tax Division 24 State House Station Augusta, ME 04332-0024 (207) 626-8475

Unemployment insurance, workers’ compensation, labor laws In addition to withholding federal and state payroll taxes, employers in Maine are required to comply with several other related regulations.

Maine law requires all employers or their insurance carriers to furnish medical and hospital services to employees who suffer jobrelated injuries or diseases. To obtain workers’ compensation insurance, contact your insurance agent. Contact the Workers’ Compensation Board for additional information: Workers’ Compensation Board 27 State House Station Augusta, ME 04333-0027 (207) 287-3751

Maine law requires all employers or their insurance carriers to furnish medical and hospital services to employees who suffer job-related injuries or diseases.

Labor laws

Liquor licenses and beer permits

If you have employees, you should be aware of state and federal laws affecting the workplace. If you have one or more employees, you must comply with U.S. OSHA (Occupational Safety and Health Administration) and Maine Bureau of Labor Standards regulations. You may also have to meet minimum wage laws or be aware of child labor standards. For information, contact

Any business selling beer or other alcoholic beverages must have a state beer permit or liquor license. Several classes of licenses are available. To apply for a beer permit or liquor license, contact your city or town clerk. For more information about state beer and liquor control requirements, contact Department of Public Safety Licensing and Inspection Unit 164 State House Station Augusta, ME 04332-0164 (207) 624-7220

Maine Department of Labor Bureau of Labor Standards 45 State House Station Augusta, ME 04332-0045 (207) 623-7900

The state of Maine does require certain kinds of businesses and occupations to be licensed.

Operating licenses and permits Most small businesses can start doing business once they’ve satisfied state and federal tax and employment-related requirements and local regulations. However, the state of Maine does require certain kinds of businesses and occupations to be licensed. Following are a few of the more common licenses issued.

Restaurant and food sales licenses All Maine businesses where food is sold, stored, prepared or processed must be inspected and licensed by the state Department of Human Services. (Restaurants and other food service businesses must obtain a food service permit. Retail food stores— including vending machines— and food manufacturers, processors, and wholesalers, must have food establishment permits.) To apply for inspection and licensing, contact Department of Human Services Division of Health Engineering 10 State House Station Augusta, ME 04333-0010 (207) 287-5671

Home Food Manufactuing License Any Maine business that manufactures food products in the home must obtain a home food manufacturing license. To apply for a license contact Maine Department of Agriculture, Food and Rural Resources Division of Quality Assurance and Regulations 28 State House Station Augusta, ME 04333-0028 (207) 287-3841

Hotel and motel licenses Businesses offering lodging to the public must also be inspected by the state Department of Human Services. To apply for inspection and licensing, contact Department of Human Services Division of Health Engineering 10 State House Station Augusta, ME 04333-0010 (207) 287-5671

• • • • • • • • • •

Engineer Funeral director Health-related occupations Hearing aid dealer Insurance sales agent Landscape architect Physical therapist Real estate occupations Securities occupations Surveyor

To learn if you’ll need to license your planned occupation, check with a trade or professional organization or contact Department of Professional and Financial Regulations 35 State House Station Augusta, ME 04333-0035 (207) 624-8500

The Home-Based Business Fact Sheet Series

Child care facility licenses and registration The Maine Department of Human Services administers licensing and registration programs for child care providers. For more information, or to apply for licensing and registration, check with the Department of Human Services. Department of Human Services Auditing, Contracting and Licensing Service Center 11 State House Station Augusta, ME 04332-0011 (207) 287-5060

Professional and occupational licenses Following is a partial list of occupations that require licensing by the state of Maine. • Accountant, CPA • Architect • Barbering occupations • Commercial pesticide applicator • Cosmetology occupations • Detective • Education occupations

This is one of a series of publications designed for the person entering or considering a new small business operation. Other publications in this series are available through your county Extension office. The full series includes: • • • • • • • • •

Starting a Home Business, bulletin #3007 Capital Sources for Your Business, bulletin #3008 How to Organize Your Business, bulletin #3009 Record Keeping for Profit, bulletin #3010 How to Insure Your Business, bulletin #3011 Estimating Retail Market Potential, bulletin #3012 So You’re in Sales, bulletin #3013 Taxes and Permits, bulletin #3014 Starting a Business in Your Home: Weighing the Pros and Cons, bulletin #4190

Adapted for Maine from Iowa by Jim McConnon, Extension business and economics specialist.

A Member of the University of Maine System Published and distributed in furtherance of Acts of Congress of May 8 and June 30, 1914, by the University of Maine Cooperative Extension, the Land Grant University of the state of Maine and U.S. Department of Agriculture cooperating. Cooperative Extension provides equal opportunities in programs and employment. 6/01 Printed on recyled paper.